International Business Machines reported Thursday that fourth-quarter revenue rose nearly 4% year over year. Even adjusting for a boost from favorable currency rates, Big Blue’s top line managed its first period of growth in nearly six years. Strong sales of systems hardware business along with IBM’s growing cloud-computing service contributed to the uplift.

Still, IBM’s shares fell Friday, much like they have done following 10 of its last 12 quarterly reports. A bit of growth, as it turns out, isn’t quite enough to assuage concerns about how the company gets there. Fourth-quarter gross margins slipped below the 50% line for the first time in five years for what is typically the company’s strongest seasonal period. And, while IBM did project annual revenue growth for 2018, it is unclear if the company can do that without continued help from favorable exchange rates.

Given that IBM’s stock had jumped more than 15% since its last quarterly report, some disappointment was bound to set in. The company also expects a slight drop in free cash flow in 2018 due to increased capital spending in key segments to drive future growth. IBM did manage to close 2017 with a small gain in adjusted per-share earnings of $13.80 after three years of declines. But the company also projected flat earnings for 2018, given its need to invest more in its business.

Those investments have borne some fruit. The “strategic imperatives” IBM has been so focused on for the last few years accounted for 46% of total revenue for 2017, compared to 41% the year before. While encouraging, for an overall business that has been in steady decline for the last six years, investors are now willing to take only so much on faith.

A $5.5 billion charge related to the new U.S. tax law pushes fourth-quarter results into the red

International Business Machines Corp. reported higher revenue for the first time in 23 quarters and signaled continued growth into 2018, giving Chief Executive Ginni Rometty breathing space as she tries to turn around the century-old tech giant.

Fourth-quarter revenue rose 3.6% to $22.54 billion. The last time IBM had revenue growth from the prior year was the first quarter of 2012, Ms. Rometty’s first as chief.

Several factors drove growth in the latest quarter: sales of industrial-strength computers—which the company typically refreshes every few years— rose 32% to $3.33 billion, while cloud-computing revenue climbed 30% to $5.5 billion. Also, currency exchange rateshave been working in IBM’s favor lately, accounting for 3 percentage points of the quarter’s revenue growth after years of being a headwind.

IBM said it took a $5.5 billion charge related to the new U.S. tax law, helping to push it into the red for the period. Its tax rate, excluding the charge but including certain one-time benefits, was 6%.

In all, the company reported a fourth-quarter loss of $1.05 billion, or $1.14 a share, compared with profit of $4.5 billion, or $4.72 a share, a year earlier. Read the rest of this entry »

Jewel Lai, center, a student at Dartmouth’s Tuck School of Business, spoke with Lindsey Windham, right, a senior marketing manager at Amazon, after a Sept. 19 information session led by Tuck alumni working at Amazon.

Amazon.com Inc., disrupter of industries from book selling to grocery shopping, has found its latest sector to upend—recruiting at the nation’s elite business schools.

The Seattle-based retail giant is now the top recruiter at the business schools of Carnegie Mellon University, Duke University and University of California, Berkeley. It is the biggest internship destination for first-year M.B.A.s at the University of Michigan, Massachusetts Institute of Technology, Dartmouth College and Duke. Amazon took in more interns from the University of Chicago’s Booth School of Business than either Bain & Co. or McKinsey & Co., which were until recently among the school’s top hirers of interns, according to Madhav Rajan, Booth’s dean. Read the rest of this entry »

On the occasion of the publication of Nadella’s first book, out this fall, Nadella and his predecessor talk shop

In February 2014, Satya Nadella became the third CEO of Microsoft . Nadella, more soft-spoken than his predecessors, Bill Gates and Steve Ballmer, assumed the company’s helm amid one of its stormiest chapters. Ballmer, toward the end of his 14-year tenure, had purchased Nokia ’s mobile phone business at great cost ($7.2 billion) but failed to make a dent in the market dominance of Apple and Samsung . Nadella quickly nixed those ambitions and instead ramped up investment in artificial intelligence and commercial cloud computing. The result has been a remarkable turnaround, featuring major growth in cloud services revenue, a doubling of year-on-year profits and an all-time stock price high.

In his new book, Hit Refresh: The Quest to Rediscover Microsoft’s Soul and Imagine a Better Future for Everyone (released September 26), Nadella, 50, explains this corporate transformation, lays out his hopeful vision for technological progress and recounts his own rich personal history.Read the rest of this entry »

Today the world’s largest software company reports earnings for the second quarter. Its share price is at an all-time high, elevated by expectations that the chief executive, Satya Nadella, will continue to transform the company and develop new business lines.

Mr Nadella, who is enthusiastic about artificial intelligence (AI), wants Microsoft to become an “AI-first” firm. He has pumped more time and money into Azure, its cloud-computing business, hopeful that it will account for much of the firm’s future growth.

But the company faces stiff competition from deep-pocketed rivals, such as Amazon and Google. Jefferies, an investment bank, reckons Azure will chalk up around $5bn in sales in 2017, or 21% of the market—an impressive sum but far less than Amazon Web Services, with 71%. Investors will be looking for clues as to how much new cloud business Microsoft has won. When expectations are great, even good results can disappoint.

IN 2014 Andrew McAfee and Erik Brynjolfsson of the Massachusetts Institute of Technology published “The Second Machine Age”. The book was a balanced portrait of how new digital technologies were poised to improve society, even as they increased unemployment and depressed wages. In their latest work, “Machine, Platform, Crowd”, the authors seek to explain the business implications behind these developments.

Mr McAfee and Mr Brynjolfsson believe that the latest phase of computers and the internet have created three shifts in how work happens. The first is artificial intelligence (AI): a move from man to machine. In the past people worked with computers and, at the same time, were augmented by them: what the authors call the “standard partnership”. But that model is breaking down as computers improve and take more control.

You need only look at self-driving cars, online language translation and Amazon’s prototype cashierless shops to see that something big is happening. Digital technologies used to be applied to information—first numbers and text, and, later, music and video. Now, the digital technologies are invading the physical world.

For instance, designing a “heat exchanger”, a part in appliances like refrigerators, means balancing many different specifications and constraints. Humans settle for one that works well enough because to find the optimal one is too hard. But new “generative design” means AI-infused software can run zillions of tiny permutations to find the best possible design—one that a human might not come up with. And with 3D printing, those designs might be shared, modified and manufactured anywhere. Read the rest of this entry »

This article is part of an ongoing series exploring changes in the workplace and in the nature of work. The first piece explored 12 megatrends, such as automation, big data, demographics, and diversity, that are revolutionizing the way work gets done. Subsequent publications will explore digital governance, talent, and culture.

The success of a transformation depends on an organization’s leaders, especially the CEO. In digital transformations, the CEO is even more critical because of the magnitude of change, the degree of disruption, and the power of inertia.

Digital transformation requires new ways of working, not just new technology. The scarcest resource at many companies is not necessarily technological know-how but leadership. Leaders need the ability to sift through an avalanche of digital initiatives, manage accelerating innovation cycles, and reshape the organization around new approaches such as agile.